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You are estimating the cost of equity of a company in Peru. The company's beta...

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You are estimating the cost of equity of a company in Peru. The company's beta is 1.30. Moody's rating for Peru is Baa3. Peru's equity market volatility is 35% (per annum), while its bond market volatility is 20%. U.S. equity risk premium is 4.24% and risk-free interest rate is 2.00% a) (4 points) Estimate the company's cost of equity (in US dollars), using the method of default spread with relative standard deviations. (Note: refer to the notes for additional information you need.) b) (3 points) Assume U.S. inflation rate is 2.00% (per annum) and Peru's inflation rate is 3.5% (per annum). Estimate the company's cost of equity in Peru's local currency c) (3 points) In general, everything else the same, do you expect the cost of equity of a small private company to be higher or lower than the cost of equity of a large. public company? Explain your

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